Primary Fund shareholders put in a bind

— -- Michael Clark was meeting with an accountant in September about his plan to open a sports bar near Denver when he got the phone call that threatened to abort his new business launch.

His Ameriprise Financial adviser was on the line with news that the Primary Fund, a $64 billion money market fund run by The Reserve, could not repay investors all they were owed.

"The week that I really needed to get my cash out, that's when the fund had their loss," says Clark, a 53-year-old software consultant who estimates he had roughly $150,000 invested in the Primary Fund. "I wasn't sure if I'd be able to actually close the deal or have to call the business owner and tell him I couldn't go through with it."

Clark is among hundreds of thousands of shareholders — including a financial arm of China's government — whose investments were frozen after the Sept. 15 bankruptcy of Lehman Bros. The Primary Fund held roughly $785 million in Lehman debt securities Reserve wrote down to zero after the collapse.

Although he says he knew mutual funds weren't risk-free, Clark says the freeze, and its timing, stunned him. "I did not ever anticipate that I would not have access to money that was mine. Even on any investment I'd never expect that," he says.

Clark turned to Ameriprise, which gave him a $65,000 loan that enabled him to buy the Bloomfield business he'll call Legends Grille Sports and Spirits.

Ameriprise has used "hundreds of millions of dollars" of its own liquidity for temporary loans to clients who face financial hardships while they await final repayments from the Primary Fund, says company spokesman Benjamin Pratt. The firm has also put up $33 million to compensate for clients' losses if, as expected, final repayments total less than what's owed.

Similarly, TD Ameritrade has committed up to $50 million to help offset Primary Fund losses, says company spokeswoman Kim Hillyer.

Clark says he repaid Ameriprise late last month, when Reserve returned roughly half of the money owed to him and other Primary Fund shareholders. With about $70,000 still frozen, he plans to tap Ameriprise again for money to paint and stock the new venture. But even with a new loan, Clark says, he may be forced to scale back the number of TVs and other equipment until the business starts generating cash flow. Uncertain about how much he'll ultimately lose, Clark says he's bitter about Reserve.

"Initially when I invested in it, they claimed they were very conservative in their investments," he says.

"And then to find out that they invested in some of the more risky things — that was very unexpected and disappointing."